FDI and Institutions in BRIC and CIVETS Countries: An Empirical Investigation

Abstract

In recent years, a number of countries with emerging economies have proceeded to use market-oriented strategies, deregulation and reforms in order to attract more foreign investors and attract foreign direct investment (FDI) inflows. The present paper aims to empirically investigate the role of governance in attracting FDI using panel data and comparing two groups of fast-growing emerging countries, namely BRIC (Brazil, Russia, India, China) and CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa). The study includes a panel data analysis using the latest available secondary data ranging from 2002 to 2019. Empirical models are extended and presented. The findings suggest that FDI inflows in BRICS are attracted by rule of law, regulatory quality, political stability and absence of violence, while CIVETS absorb FDI inflows due to control of corruption, political stability, absence of violence, regulatory quality and government effectiveness. The paper contributes to the existing literature since it is the first attempt to investigate the role of governance in attracting FDI in BRIC and CIVETS economies, taking into consideration other FDI determinants. To our knowledge, it is the first paper to study and compare FDI and institutional determinants in the specific groups of emerging countries.

Terrorism and economic complexity in Africa: The unconditional impact of military expenditure

“…Çinar (2017) specifically showed that the adverse impact of terrorism is more pronounced in less developed countries. Furthermore, studies conducted by Ali et al (2017) for Pakistan, Bezic et al (2016) for European countries, Filer and Stanišić (2016) for a world sample of 160 countries, Kinyanjui (2014) for Kenya, Iheonu and Ichoku (2022) for African economies, Kechagia and Metaxas (2017) for Asian economies support the notion that terrorist activities negatively affect foreign direct investment inflow. Nabin et al (2022) confirmed the negative impact of terrorist activities on economic development in 151 countries, both developing and developed, between 2005 and 2019.…”

Effect of institutional quality on FDI inflows in South Asian and Southeast Asian countries

“… Western Balkan countries [ 49 ] 2000–2017; Meta analysis Institutional quality has a positive impact on FDI inflows. BRICS [ 50 ] 2002–2019; Panel Regression Rule of law, regulatory quality, political stability and absence of violence have a positive impact on FDI inflows in BRIC. BRIC and CIVETS Control of corruption, government effectiveness, regulatory quality, political stability and absence of violence have a positive impact on FDI inflows in CIVETS.…”

“…Market size can be measured through the GDP growth rate of a country [ 50 ]. The macroeconomic stability is measured through a set of variables such as financial development, total capital formation [ 43 ], international trade [ 57 ], exchange rate [ 58 , 59 ] and inflation [ 60 , 61 ].…”

Effects of terrorism and economic policy uncertainty on economic complexity in Africa: A study of the moderating role of governance institutions

“…Studies have also shown that terrorist activities impact negatively on foreign direct investment inflow ( e.g . Kinyanjui, 2014, for Kenya; Bezic et al, 2016, for European countries; Ali et al, 2017, for Pakistan; Filer & Stanisic, 2016, for a world sample of 160 countries; Kechagia & Metaxas, 2017, for Asian economies; Iheonu & Ichoku, 2022, for African economies). In addition, Mehmood and Mehmood (2016) and Siddique et al (2017) also found that terrorism deters domestic investment.…”